TMI Blog2018 (8) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted on payment Salaries & Travel cost and decide the issue afresh in accordance with law. Disallowance u/s. 37(1) - AO/DRP have disallowed these expenditures being not relating to business purpose of assessee - Held that:- As AR requested to send back this issue also to the Assessing Officer for verification because the ld. DRP did not consider the vouchers placed before them. He placed evidences before the DRP to establish that the expenditure were incurred wholly and exclusively for the purpose of business, we restore this matter to the file of the Assessing Officer on this issue also for verification and decision afresh in accordance with law. Needless to say, the assessee shall be given reasonable opportunity of being heard. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2010-11 to 2013-14 relevant to A.Yrs. 2011-12 to 2014-15. It is also stated that the appellant is entitled to file modified return as per section 92CD(1) in accordance with the APA within a period of three months from the end of the month in which the agreement was entered into and as per Rule 10RA(4) of the IT Rules, the appeal, if pending for any rollback year on the issue which is subject matter of APA, shall be withdrawn to the extent of the issues covered by the agreement. He, therefore, submitted that relevant grounds Nos. 2 3 of appeal under consideration are withdrawn. Accordingly, these grounds of appeal are dismissed as withdrawn, as noted above. 2. The remaining grounds, which need adjudication read as under : 4.Disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case and in law, the DRP directions are bad in law, to the extent of enhancement of income in relation to disallowance of expenditure amounting to made amounting to INR 3,68,01,315, as no show-cause or opportunity of being heard was given before making such disallowance, which is sine qua non as per provisions of section 144C(11). 4.5. That on the facts and circumstances of the case and in law, the AO / DRP have erred in disallowing the expenditure of INR 3,68,01,315 under section 37(1) of the Act, on account consultancy charges paid by the Appellant to its AE, alleging that the same have not been incurred wholly and exclusively for the purposes of the business. 4.6. That on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Manufacturing of air-conditioners for the purpose of selling to third party customers in India. The Appellant had set-up a factory in Rajasthan in February, 2008 for manufacturing of air conditioners and started manufacturing operations in September, 2009. The Appellant incurred expenditure on import of raw materials for undertaking manufacturing function. It also incurred training cost and consultancy services cost in relation to its manufacturing operations and has also made payment for royalty for receipt of technical know-how in relation to manufacturing operations. 3.1. For the subject assessment year, the Appellant entered into the following international transactions with its AE. * Distribution Function - Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consultancy expenses 3,68,01,315 Travel Costs 51,74,359 Total reimbursement by Appellant 12,29,73,363 3.4 Thereafter, the DRP suo-moto directed for the following additions / disallowances: - In relation to expenditure incurred towards (i.) salaries and (ii.) travel cost, the DRP held that the same constitutes Fee for Technical Services ( FTS ), chargeable to tax in India in the hands of OIL and accordingly disallowed the aggregate claim amounting to ₹ 8,61,72,048 under section 40(a)(i) of the Act, since no tax was withheld on the same. - In relation to consultancy fee amounting to ₹ 3,68,01,315, the DRP held it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DRP without verifying the documents submitted, upheld it as payment for FTS. He also submitted that the similar payments made by assessee in A.Y. 2010-11, 2012-13 to 2014-15 have been accepted by the Revenue. He requested that the mater should go back to the Assessing Officer for verification to ascertain the exact nature of payments to the employees. 5. The ld. DR relied on the orders of the authorities below and stated that the matter may be remanded to A.O. 6. We have heard both the sides and perused the entire material on record. The ld. AR of the assessee drew our attention to copies of Form No. 16 and details of the employees placed in the paper book, which have not been examined by the authorities below. We, therefore, think ..... X X X X Extracts X X X X X X X X Extracts X X X X
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